529 Plans

The Importance of Keeping the End Result in Mind

Have you discovered the beauty of the “Reminders” feature of your iPhone? It is a wonderfully helpful tool as it has helped me remember to complete many tasks that I would have completely forgotten otherwise. This “reminders” feature allows something that has escaped my mind to be brought back into clear and immediate focus.

Perhaps we should do this for the bigger aspects of our life!

Do you understand how important it is to keep the end result in mind? It is a helpful and healthy exercise to regularly think about the reasons for your activity. This is because those reasons can easily slip your mind thus creating the need for reminders.

Keeping the end in mind allows you to sustain the mundane, humdrum, boring, drip-drop activities that individually mean little but collectively add up to a lot!

A practical example in my own life
Over 18 years ago, my bride and I welcomed a baby girl into our life. As she gave her first few cries of life, it was a notification that she was probably going to college! An 18 year notice that went by so quickly, it is hardly believable.

I had graduated from college with a mountain of student loan debt and credit card balances. My new bride had student loan debt. It was our desire that our child(ren) wouldn’t have to start out life with a pile of debt. With this commitment, we had an “End Result in Mind” – To help our child(ren) graduate debt-free.

Then we took action by establishing a 529 college savings plan for her and set up an automatic monthly contribution of $100 per month.

And then we went through the humdrum, the mundane, the month-after-month steps of contributing $100 per month. Then we paid off our non-house debt.

Keeping the “End Result in Mind”, we increased our contribution to $200 per month.

And started another trot down the boring, monotonous, plodding activities of life. Month after month after month after month …

The stock market collapsed in 2008, but we kept the “End Result in Mind” and continued the journey. Month after month after month after month after month. Facing down one financial challenge after another, we kept the “End Result in Mind” and continued to contribute. We went through financial challenges too numerous to list them all, but here are a few. IVF. Broken downstairs heat pump. Broken upstairs heat pump. Dead hot water heater. New roof. Multiple surgeries (and accompanying insurance deductibles).

Yet, we never lost sight of the goal. Honestly, at times it felt like college was something mythical and too far into the future to be worrying about, but our feelings lie to us. In spite of the challenges, we never missed a single month of contributing to the college fund.

THEN IT BECOME A REALITY!

I found myself carrying a futon into my daughter’s college dorm room as she begins her freshman year. It was all done with a smile because persistence has allowed it all to be done without the incurring of debt. None. Zero.

If you are the parent of youngsters, I encourage you to define your “End Result” you need to keep in mind, and then take action by contributing to a 529 college savings plan!

Never underestimate the power and importance of keeping the end in mind.

One last note: Retirement today kind of feels like college expenses seemed like 18 years ago …

529 Plan Series: Virginia College Savings Plan

Today, I review another state's 529 college savings plan as part of the 529 Plan Series at JoeSangl.com!

Let me introduce you to the Virginia College Savings Plan. 

This 529 plan is managed by one of my favorite mutual fund companies – American Funds.

What I Like About The Virginia College Savings Plan

  • CollegeAmerica.  This is the partnership between the Virginia College Savings Plan and American Funds.  You can read about it in detail HERE.  I really like American Funds' mutual fund offerings.
  • Choices.  American Funds offers 22 different mutual funds as part of the CollegeAmerica plan.  You can also choose to put together a selection of the 22 different mutual funds and take an age-based approach toward your investment.
  • Low Initial Investment Requirement.  You only need $250 to get started with the CollegeAmerica plan.  That makes this available to everyone!
  • State Tax Deduction for Virginia Taxpayers.  If you are a Virginia resident and contribute to this fund, you are most likely eligible to deduct those contributions from your state taxes!  Virginia residents are allowed to deduct up to $2,000 PER ACCOUNT per year with unlimited carryforwards.  NICE!

What I Would Like To See Improved

  • This is a general improvement that I would like to see with all 529 plans, not just the Virginia College Savings Plan.  I would really like to see contributions to ANY state's plan be DEDUCTIBLE from one's own state taxes.  I know.  I know.  I am dreaming again, BUT it would really provide a huge incentive for states to have a great and competitive 529 plan.

Read reviews of other state 529 college savings plans HERE.

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529 Plan Series: Pennsylvania’s “PA 529 Investment Plan”

Today marks another installment in the "529 Plans" series at www.JoeSangl.com!

Today, I will review Pennsylvania's 529 plan – the PA "529 Investment Plan".

This 529 program is managed by Upromise Investments and the investments are managed by Vanguard [I have reviewed Vanguard HERE]. 

What I Like About The PA 529 Investment Plan

  • Investment Management By Vanguard.  I really like Vanguard's performance and low expense ratios.
  • Upromise Linked.  You can link your Upromise qualifying purchases to this 529 which can help boost your savings.
  • Tax Deduction For PA Taxpayers. From the PA 529 Investment Plan website: "For each beneficiary, PA residents may deduct up to $12,000 in contributions annually from their Pennsylvania state taxable income ($24,000 if married filing jointly, provided that each spouse has taxable income of $12,000)."  If you have two children and have established two separate 529 accounts, then you can take an even larger deduction!
  • Investment Options.  There are three age-based options and ten individual investment portfolio options available.  I like choices!

What I Would Like To See Improved

  • This is a general improvement that I would like to see with all 529 plans, not just the PA 529 Investment Plan.  I would like to see an option that allows one to withdraw money from the 529 plan penalty-free if one has paid for a child's college and there is no need for the college savings plan any longer.  Right now, there is a 10% federal penalty tax if one pulls the money out of any 529 plan for anything other than qualified educational expenses.  I would like to at least have the option to roll any extra money over to a Roth IRA – free of penalties.

Read reviews of other state 529 college savings plans HERE.

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529 Plan Series: South Carolina Future Scholar

Welcome to another series on JoeSangl.com – 529 Plans.

In this series, I will be reviewing 529 college saving plans offered by different states.

It might be helpful to first review what a 529 plan is.  A 529 plan is a tax-advantaged college savings plan that is named for the section of tax code that outlines how they may operate – Section 529.

Today's 529 Plan is South Carolina's plan – Future Scholar

 
The South Carolina Future Scholar 529 College Savings Plan is managed by Columbia Management (a division of Bank of America).

What I Like About The Future Scholar Plan

  • Columbia Management.  I like some of the funds that are offered by Columbia Management.
  • Tax Deduction.  Although there are some restrictions, most South Carolina residents can deduct their Future Scholar contributions from their SC state tax return!
  • Self-Directed Option.  Through the "Direct Program" SC residents can manage their own investments, and if one chooses to do so the "load" (sales charge) is $0!  If one chooses to invest in the Future Scholar plan with the help of an advisor, there will be a sales charge of around 5%.  The sales charge should not deter someone from investing for college however!  If you are really intimidated by investing and mutual funds, it would be worth the sales charge to ensure you are getting good advice!
  • Learning Center.  The Future Scholar plan offers a great site to help one understand and plan for education costs.  It is located HERE.
  • Investment Options.  The Future Scholar plan offers three investment options. 
  1. Automatic Allocation Choice – This option allows one to "set it and forget it" in regard to adjusting the portfolio.  It is really aggressive when the beneficiary is very young and moves steadily to become more stable as the child approaches college time.
  2. Asset Allocation Choice – This option allows one to make a more specific decision on how one's investments are allocated.  This requires a more hands-on approach if one wants to adjust the portfolio.
  3. Single Fund Portfolio – This option allows one to invest in specific mutual funds offered via Columbia Funds.

What I Would Like To See Improved

  • Expense Ratios.  I would love to see the expense ratio of the funds reduced.  The average expense ratio is around 1.40% to 1.50%.  This is an every year fee and erodes the growth of the investment.

My daughter's college savings is in the SC 529 Future Scholar plan.  The tax benefit was the final straw for me to move the investment from another state's plan to the SC plan.

Are you saving for your child's college education?
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